Hess To Sell Half Of Bakken Midstream Assets For $2.675 Bln, Form JV

(RTTNews) - Energy company Hess Corp. (HES) said Thursday that it has agreed to sell a 50 percent stake in its Bakken midstream assets to private equity firm Global Infrastructure Partners for $2.675 billion in cash.

Hess and Global Infrastructure Partners will create a midstream joint venture called Hess Infrastructure Partners, valued at $5.35 billion.

The transaction is expected to be completed early in the third quarter of 2015. Upon closing, the joint venture will incur $600 million of debt through a 5-year Term Loan A facility, with proceeds to be distributed equally to both partners. Hess will receive after-tax cash proceeds of $3 billion from the deal.

The joint venture will also have independent access to capital, including a $400 million 5-year senior revolving credit facility that is fully committed.

Upon closing, the joint venture will continue to pursue a proposed initial public offering or IPO of Hess Midstream Partners LP common units.

John Hess, CEO of Hess said, "The joint venture with its strategically located assets will be one of the largest midstream operators in the Bakken. By capitalizing on the financial strength and midstream energy experience of Global Infrastructure Partners, the joint venture will be in a strong position to fund future energy infrastructure investments and continue to grow its midstream business."

The Hess midstream assets to be included in the joint venture are a natural gas processing plant, rail loading and pipeline terminals, propane storage cavern as well as rail and truck transloading facility, and crude oil and natural gas gathering systems.

Hess Infrastructure Partners' board of directors will consist of six directors, with three members each elected by Hess and Global Infrastructure Partners.

Hess said that with the proceeds from this transaction, cash on hand and an untapped $4 billion revolving credit facility, it will have a highly advantaged liquidity position compared to its peer group.

Hess will use proceeds from this transaction to preserve the strength of its balance sheet in the current oil price environment, provide additional financial flexibility for future growth opportunities and continue to repurchase stock.

As a result of the joint venture, Hess will begin reporting its Bakken-related midstream operations as a separate midstream segment in its consolidated financial statements.

For the three months ended March 31, 2015, the midstream segment had net income of $27 million, and earnings before interest, taxes, depreciation and amortization or EBITDA of $64 million.

For the twelve months ending March 31, 2016, Hess expects midstream segment EBITDA to be $290 million to $300 million. The company projects capital expenditures to be funded by the joint venture on a 100 percent basis for the same period to be $325 million to $350 million.

HES closed Wednesday's trading at $65.64. In Thursday's pre-market activity, the stock is up $3.06 or 4.66 percent to $68.70.